Ian Hannam, one of the City's most enigmatic bankers, has resigned from JP
Morgan after being fined £450,000 by the Financial Services Authority for
market abuse related to passing on insider information.

Ian Hannam, pictured during his time in the SAS, challenged the City regulator's fine for market abuse.

The City watchdog said it chose to "punish" Mr Hannam, JP Morgan's global chairman of equity capital markets, for relaying inside information about his client Heritage Oil to another contact in 2008.

The FSA said that while Mr Hannam "did not act without honesty or integrity" he should have known better because he was "a very senior banker" and "a role model". The regulator said the fine was also intended as a deterrent for "him and others" against committing market abuse.

However, many in the City hit back at the FSA and backed Mr Hannam. Mick Davis, Xstrata chief executive, said Mr Hannam was "a great credit to his profession". Martin Gilbert of Aberdeen Asset Management said his company would not have survived or been in the FTSE without the banker named "king of the miners".

David Davis, the former Tory leadership candidate who has backed Mr Hannam in his efforts to fight the FSA charges, branded the regulator "dysfunctional" and said its case was "astonishing".

"I really can't find where the common sense charge is. There has been no benefit, no loss, no trade," said Mr Davis. "To destroy someone's career just to extend the law about what is considered insider information is beyond what is reasonable. You don't try to convict people and then make it law. The FSA... have turned to scalp-taking missions."

However, a source close the FSA said the allegations were "plain and simple" and part of a "significant area of interest" for the regulator.

"There are clear regulatory responsibilities that bankers have. The fact that no one traded on this information is by the by – they could have," the source said.

The case has already been heard by the Regulatory Decisions Committee – an independent body of City experts – whose findings Mr Hannam will now fight in a tribunal.

The RDC notice said: "Mr Hannam's behaviour was not in the proper course of his employment, profession or duties. He disclosed inside information where this was unnecessary, unwarranted and purely in the furtherence of his client's commercial interests. Doing so was not reasonable."

The FSA's charge centres on two emails sent by Mr Hannam to Mr A – thought to be a Kurdistani politician – and a third party, Mr B, about Heritage Oil. JP Morgan was trying to sell the oil company on behalf of its boss, Tony Buckingham.

In September 2008, Mr Hannam sent Mr A an email telling him there was an offer for Heritage priced at 350p to 400p a share. "I'm not trying to force your hand, just wanted to make you aware of what was happening," he said. The following month, another email drafted on Mr Hannam's behalf said: "PS - Tony, has just found oil and it is looking good."

Following Tuesday's move by the FSA, Mr Hannam said he would stay on at JP Morgan to oversee deals such as the planned £50bn merger of Glencore and Xstrata and then step down to avoid "unfair distraction to my clients and colleagues".

He added: "It is important to note that the FSA has not challenged my fit and proper status and has accepted that I acted with honesty and integrity. I strongly believe... the FSA's conclusions are wrong."